Quantum Advisory’s investment summary for Quarter 4 of 2021

With inflation accelerating at its fastest pace in more than nine years and two interest rate rises by the Bank of England in as many months, independent financial services consultancy Quantum Advisory has warned we may not see inflation return to target levels until next year.

The Bank of England increased interest rates by 0.15% in December 2021, followed by a further increase to 0.5% this month (February 2022).

Quantum’s investment market summary for the fourth quarter of 2021 also showed that GDP has now risen slightly above its pre-COVID-19 pandemic level.

Joe Condy, Senior Investment Analyst for Quantum Advisory, said:

“Performance of most risk markets was generally positive over the quarter despite the emergence of the Omicron COVID variant and we are expecting 2022 to be another good year for global growth, recovering to its pre-pandemic levels.

“However, inflation in the UK is soaring and fears relating to interest rate rises has been a major influence on markets over the quarter.

“Inflation measured 5.1% in November, which is well above the Bank of England’s target rate of 2%. As a consequence, the Bank of England announced its first interest-rate hike in December, and the market began to price in another rate rise immediately despite the Monetary Policy Committee contending with headwinds such as slower growth as a result of the most recent lockdown restrictions. Market implied pricing places the interest rate just under 1.2% by the end of 2023, but only time and future developments will tell if this will play out or not.”

Quantum’s market overview also showed that GDP is estimated to have grown by 0.1% in October and 0.9% in November, and is now 0.7% above its February 2020 level. In addition, a fall in energy output following a rapid increase in energy prices during the previous quarters weighed on GDP. The analysis highlighted that households began to use their lockdown savings to finance additional spending with the Office for National Statistics (ONS) confirming the savings ratio fell to 8.6% of disposable income, down from almost 11% in Q2.

Production output remains 2.6% below pre-COVID levels whilst construction is now above February 2020 levels by 1.3%. On the employment front, Quantum pronounced from July to September 2021, the unemployment rate had decreased by 0.3% while the number of job vacancies in September to November 2021 rose to a new record of around 1.2 million; an increase of 435,000 from the pre-pandemic levels. Total wages also improved over the period by 4.9%.

To listen to the full overview as a vodcast, visit: https://quantumadvisory.co.uk/quantum-press/quantums-q4-investment-market-review-vodcast/.